Asian Financial Crisis (1997)
What It Is
The Asian Financial Crisis was a regional currency and banking crisis that began in Thailand and spread across East and Southeast Asia.
Why It Matters
It exposed weaknesses in emerging market financial systems and reshaped global views on currency pegs and capital flows.
How It Happened
- Thailand’s baht collapsed after speculative attacks
- Currency contagion spread to Indonesia, South Korea, Malaysia
- Corporate debt denominated in dollars became unpayable
- IMF bailouts imposed strict reforms
Key Components
- Currency devaluation
- Capital flight
- Dollar‑denominated debt
- IMF intervention
Example
South Korea required a $58 billion IMF rescue package, one of the largest in history.
Key Takeaways
- Currency pegs can fail under speculative pressure.
- Foreign‑currency debt magnifies crises.
- The crisis reshaped emerging market policy frameworks.